Bad loans of PSU banks are declining: Govt officials

PSBs made record recoveries of Rs 60,726 cr in the first half of the current financial year.

Public sector banks (PSBs) also made record recoveries of Rs 60,726 crore in the first half of the current financial year, more than twice that in year-earlier period.

New Delhi: Bad loans of state-run banks are in decline and the lenders have recognised most of their stressed assets, a government official said.

The gross non-performing assets (NPAs) of state-run banks have begun dropping after peaking in March, registering a fall of Rs 23,860 crore in the first half of the current financial year.

“The recognition exercise is nearly over with restructured standard assets declining from the peak of 7.0% in March 2015 to 0.59% as of September 2018,” said financial services secretary Rajiv Kumar.

According to the latest finance ministry data, accounts overdue by 31 to 90 days (special mention accounts 1 & 2), which are still not nonperforming assets (NPAs), have declined by 61% over five successive quarters from Rs. 2.25 lakh crore in June 2017 to Rs 0.87 lakh crore in September 2018.

“This has substantially pared down credit at risk,” said Kumar. This indicates additions to nonperforming assets will slow down.

Public sector banks (PSBs) also made record recoveries of Rs 60,726 crore in the first half of the current financial year, more than twice that in year-earlier period.

“The Provision Coverage Ratio (PCR) of public sector banks has risen steeply from 46.04% as of March 2015 to 66.85% as of September 2018, giving banks cushion to absorb losses,” Kumar said.

With additional capital being infused, the government expects at least two or three banks to get out of the RBI’s prompt corrective action (PCA) framework before the end of this fiscal.

Earlier this month, finance minister Arun Jaitley said the government would invest an Rs 41,000 crore in state-run lenders over and above what had been announced earlier to strengthen their capital base. This would enhance the total recapitalisation in the current fiscal from Rs 65,000 crore to Rs 1.06 lakh crore.

Jaitley had said that this would enhance the lending capacity of PSBs and help them exit the Reserve Bank of India's PCA framework that imposes curbs on certain business operations.